Wealth and the Wealthy: A Defense

Luxury boats at the Monaco Yacht Show in the port of Monaco, September 22, 2021. (Eric Gaillard/Reuters)

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Extreme Wealth Is Not a Problem

Item A: A friend in Florida recently noted the very expensive new townhouses that are going up in his new neighborhood, new homes with a starting price of about $20 million. How is that even possible? he wondered. Who is buying these? Where do they come from? And why are they coming here? He concluded that eventually he would no longer be able to comfortably afford to live in the community where he has long resided. I listened with sympathy, even though it was a little peculiar to hear a resident of Fisher Island — the single-wealthiest community in the United States — complaining about gentrification.

Item B: Gentrification at the expense of the gentry is hardly limited to private islands in the United States. Rich Londoners are finding it difficult to afford London. In Zurich — which runs neck-and-neck with Hong Kong, Paris, and Singapore for the title of world’s most-expensive city — they were a little worried about becoming London, a city where the price of housing in the central part of the city was driven to astronomical heights in large part by foreigners (mostly from countries where politics is a lot more exciting than it is in the United Kingdom) who were in effect using the properties as depository banks, resulting in the odd situation of blocks of generally empty flats where no one could afford to live. Londoners worried about being priced out — as with Fisher Island, it was odd to hear the ladies and gentlemen of Knightsbridge and Kensington complaining of gentrification, but, there it was. Switzerland, being much smaller and therefore more sensitive to the flow of fast foreign money, didn’t want to see that happen in Zurich and its other major cities, so the Swiss passed a law that makes it very nearly impossible for a foreigner, no matter how wealthy, to buy a home in Zurich, Geneva, or Basel. And, playing against the exaggerated legend of Swiss financial secrecy, they forbid purchasing a house in the name of a company, meaning that Russian oligarchs and Chinese party bosses looking to sink their funds into a Swiss ski chalet (foreigners can still buy properties in designated resort areas) will have to explain where those funds came from, which might prove uncomfortable. Thus the struggling homeowners of Zurich (median home price $3 million) were protected from the dire threat of foreign money.

Item C: Many Americans are finding it difficult to buy a new car. The current wait to buy a Toyota Tundra pickup truck in Southern California is between nine months and 18 months. Some people who went onto waiting lists to buy 2021 cars never got them — and won’t. Jeep Wranglers are as scarce as hens’ teeth: A woman trading in a two-year-old Wrangler in Ohio over the summer was paid more for the trade-in than the car had cost new. (That’s bad news if you want to buy a Jeep, but great news if you want to sell one.) But do you know who is fulfilling their orders? Rolls-Royce, Bentley, Porsche, and, for the most part, BMW. As the Wall Street Journal explains, shortages of computer chips and other components caused big automotive conglomerates (Bentley and Porsche are Volkswagen products, Rolls-Royce is owned by BMW) to prioritize their highest-margin automobiles over other products. (By the way, if you are feeling like an underachiever, consider that the average age of a Rolls-Royce buyer today is a youthful 43 years old.) Rolls-Royce had a record year, in fact, selling 5,586 automobiles, half again as many as the prior year. Where is that money coming from? A booming stock market and cryptocurrency speculation, the Journal reports.

Item D: Supply-chain disruptions — ranging from complex global logistics challenges to the simple lack of output at factories shuttered because of the Covid-19 epidemic — have made it difficult to find many very different products at very different points across the price spectrum: As noted here at National Review, one restaurant menu inspired mirthful attention by advertising chicken wings at “Market Price,” a designation more often seen with lobster or other more rarefied protein.

(I do not recall ever having seen anything sold at “Market Price” at a vegetarian restaurant, though it may happen.)

But one product that currently stands out as extraordinarily difficult to find: the high-end wristwatches favored by the sort of people who are driving up Rolls-Royce sales. Rolex boutiques are almost entirely empty around the world, while the even more expensive brands have waiting lists that range from the long to the indefinite, and only favored customers can get on the waiting list. A couple of months ago, I walked past an Audemars Piguet boutique that was for some reason paying for retail space and staff in spite of the fact that the shop had not a single item for sale in it. This is a place at which you could expect to pay $25,000 for a basic steel watch (and well into the six figures for something more elevated), and the inventory was gone. Other high-end makers (Patek, Vacheron Constantin, etc.) are in similar situations. Who on earth is buying these? Some of it is tulip mania: As new watches became more difficult to find, “flipping” timepieces became more attractive (at the moment, a highly desirable Rolex Daytona sold at the authorized-dealer’s price of $12,550 might go for $40,000 on the secondary market), which led to speculators snatching up what inventory remained, creating a kind of vicious circle. Some of it is that the fine Swiss watch is the (relatively) poor man’s London flat: As one cynical Chinese businessman put it, it is nice to have on your person at all times something that could plausibly be traded for a flight to anywhere in the world, if it should come to that. Some of it is just the same great sloshing torrent of gains accruing to stock investors and financial speculators.

Item E: In October, somebody paid $2.33 million for a 1991 cask of Macallan whiskey that came with a specially commissioned NFT — the digital tulip of our time.

These news items, and others like them, have the usual people making the usual complaints about the usual villains: the world’s wealthy. Of course, now we call them “super-wealthy” or “ultra-wealthy,” partly because almost everybody is so much wealthier than he was a generation ago, partly because we are stupidly addicted to pseudo-intensifiers (which is why so many presumably literate professional writers insist on wrongly calling the center of something the “epicenter,” a word that means — notice, now — “not the actual center”), and partly because it is natural to mob politics that the smallest available minority (say, the “1 percent”) is the preferred enemy of the People. If some people are having a hard time of it, then it must be because some other people are having a very good time of it — so the dumb thinking of our time goes.

We keep failing to learn the lesson of the Battle of the Yacht Tax — one of the many lessons of the 1990s that we should have taken to heart by now but have not.

Toward the end of his presidency, George H. W. Bush did something that helped ensure that it was the end of his presidency: cutting a budget deal with congressional Democrats that raised taxes in spite of his famous 1988 pledge: “Read my lips: No new taxes!” One of the new taxes instituted in 1990 was a 10-percent luxury tax on certain targeted rich-guy (and rich-lady) indulgences such as yachts and furs. You can see the populist argument: Why raise taxes on regular people who count on a paycheck every two weeks, or cut spending that benefits them, when you could just make a wildly expensive yacht a little more expensive? There were a couple of errors baked into that tax-policy cake: One was the assumption that yacht buyers are not very price-sensitive, but they are — price-sensitivity tends to go along with the other qualities of mind that cause people to end up with enough money to buy yachts and the like. The second error was completely ignoring the supply side of the equation: Yes, the people who buy yachts are rich as Croesus, but the people who make yachts aren’t — they are blue-collar workers and craftsmen. Some of the people who sell yachts end up pretty rich, but most of them are salesmen and managers with pretty ordinary incomes. And the luxury tax on yachts pummeled their livelihoods. Overall boat sales fell by almost half, and the sales of the big boats that would have produced big tax liabilities fell by 80 percent. Thousands of jobs were lost, many of them in the states of tax-the-rich Democrats such as Ben Cardin of Maryland, now a senator but a member of the House at that time.

Just as Senator Elizabeth Warren wants to pillage the rich except for the ones who make their money manufacturing high-margin medical devices in Massachusetts, and Democrats at large want to soak all the millionaires except the ones that have shockingly high property-tax bills in San Francisco and Greenwich, Democrats who had supported the yacht tax discovered the hard way that tax policy implicates everybody, that taxes aimed at the rich hit ordinary workers and middle-class people rather than just a few Thurston Howell III types.

In contrast, the sale of luxury goods is a pretty effective way to transfer income from the wealthy to less-wealthy people who manufacture, sell, maintain, design, market, ship, package, finance, and insure the things they buy, from the well-off engineer in California who designs the product to the hourly worker who hauls it up the stairs of the buyer’s mansion. I recently spoke with the manager of a high-end watch boutique, an immigrant who studied at the famous Ecole hôtelière de Lausanne, which sounds pretty fancy but which is, in reality, the Harvard of hospitality schools, a place where students learn to do the unglamorous work behind the scenes in glamorous enterprises. Would that manager be better off if there weren’t people willing and able to pay $50,000 for a watch? I would imagine that selling $10 plastic watches at Walmart is more work and pays a good deal less.

The silly thinking of class-war politics is at odds with the fundamental facts: Boat-builders would be a lot worse off, and certainly no better off, if confiscatory taxes prevented anybody from becoming wealthy enough to buy a yacht. A lot of people with very modest incomes would be desperately poor — or dependents — if we all started cleaning our own houses and cutting our own grass like good egalitarians, if we all started eating home-cooked beans instead of going out for the occasional ribeye — or even wings at “Market Price.”

Today’s staple was yesterday’s luxury: Jane Austen did not live in a cave, but she wrote at a time when beef was a luxury or near-luxury often out of the reach of the poor, and now it is something to be had on the McDonald’s dollar menu. How did that come to pass? It is not as though some new kind of cow were invented in 1817 that solved the problem of beef scarcity. The consumption enjoyed by wealthy people spurs investment in the goods and services the wealthy demand, and markets are often — though by no means always — pretty good at democratizing consumption. Some of that is pretty straightforward manufacturing economics: producing the first widget is pretty expensive but, once you have set up the widget factory, producing the 10-millionth widget is radically less expensive. Research and development targeted at high-margin products for the wealthy ends up enabling consumption of the same goods by less-wealthy people, which is why damned few Millennials have ever rolled down a car window, and no teenager today knows what to do with a telephone that plugs into the wall and has a rotary dial. Jamie Dimon may fly around on JPMorgan’s private jet, but J. P. Morgan himself never hopped on an airplane for a three-day weekend in Las Vegas the way a lot of ordinary schmucks can afford to do today. The glamorous connotations of the term “jet set” may sound faintly ridiculous in a world in which Spirit Airlines exists, but we have jet service for ordinary people because we had it for wealthy people first. And if the wealthy in our time prefer to fly private, that is about $5,000 an hour out of their pockets into the pockets of the people who make that rarefied luxury possible.

The United States does not suffer from having too many billionaires. If it suffers from anything, it is from having too many poor people, which, for some reason, we insist on importing in considerable numbers — and the Chamber of Commerce now proposes doubling immigration to solve the “labor crisis.” I am not sure there is a labor crisis. I am very sure that the labor market has changed in dramatic ways in the Covid-19 era, and that it is much more expensive to fill many kinds of jobs than it was a few years ago. Some of that is organic and some of it the result of public policy, including some not very intelligent public policy discouraging work. (But refusing to police the border and declining to enforce employment-eligibility rules are policy decisions, too. So is driving the interest rates on regular savings accounts down to approximately 0.00 percent while subsidizing the interest rates Oberlin graduates pay on their student loans. I could go on.) If the changed economic landscape means that wages for certain labor-intensive jobs goes up, even at the expense of business profits, then nobody will be better pleased than I.

But it isn’t just Covid and extended unemployment benefits: As many economists and business leaders have observed, firms looking to reduce costs by substituting capital for labor (through automation and such) already have gathered much of the low-hanging fruit, and workers, especially those in service, are starting to discover that they are not as easily replaceable by robots as some had imagined. DIY ordering on a touchscreen may work just fine at a burger joint, but it is not going to fly in places with white tablecloths and $60 entrees. Self-checkout is great for cranky misanthropes who would pay 5 percent extra not to talk to a cashier at Home Depot or Whole Foods (guilty!) but the people at Nieman Marcus are going to want some human attention.

When it comes to transferring income from labor to capital, a tight labor market is the best social-welfare program there is.

Words About Words

In spite of the occasional folk etymologies claiming otherwise, the word crass is derived neither from the famously wealthy Lydian king Croesus (usually pronounced KREE-sus) nor from the famously wealthy Roman triumvir Marcus Licinius Crassus, with whom he often is confused. Croesus is a kind of Solomon-Midas figure (according to a BBC history feature, Midas was believed to have rid himself of his golden curse by bathing in the Lydian river from which the nation’s gold was extracted) whose name has been used in English as a byword for wealth since the 14th century. Crassus, on the other hand, has been associated with avarice and licentiousness since Plutarch wrote about him in the first century Anno Domini. It wouldn’t be wrong to compare a rich man’s wealth to that of the man said to be the richest Roman, but it is the Greek you usually want when you say: “Richer than Croesus.”

The Latin crassus means physically dense or thick, but its English cognate has been used to mean mentally dense or thick, and then more commonly to mean socially inelegant or awkwardly grasping, as in a “crass opportunist.”

Also from above: While it might be tempting to write that the yacht tax decimated the boat-building industry, it was, as noted, far worse than that, reducing yacht sales by 80 percent. To decimate something is, as the word suggests, to reduce it by one-tenth. Decimation — killing every tenth member of the group — was a collective punishment inflicted on soldiers for mutiny or desertion. It sounds really bad — so bad that is it very often wrongly used to describe something that was, in numerical terms, much worse.

Rampant Prescriptivism

A reader wants to know: Can an inanimate object boast?

I say: no. Not really.

You will sometimes see sentences such as: “The home boasts five en-suite bedrooms.” (Yes, you want the hyphen there, when en-suite functions as a compound modifier; but you don’t require it if you write: “Each bedroom has a bathroom en suite.”) But a house (it’s always a home when somebody is trying to sell you something) does not boast, or brag, or rejoice, or anything of the sort. This is marketing language at work, and marketing language should always be regarded with contempt.

Boast may legitimately be used to mean “possess something that is a point of pride,” but this should be used for people, who feel pride, or for organizations, which are made of people: “Apple boasts the highest sales of any company in its industry.” In the same way, you might write: “Ferrari rejoices in its 238 Grand Prix victories,” but not “The SF90 Spider rejoices in its 986 horsepower.”

(It occurs to me that this week’s newsletter makes it sound like I have won the Powerball. I haven’t.)

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Beastly Happenings

Pope Francis criticizes people in the rich world who have substituted pets for children. His Holiness is not wrong to do so, but I am pretty sure that Pancake has become a Lutheran.

In Closing

The treatment of Novak Djokovic enraged Serbian nationalists, who have taken the great athlete as a mascot. But the hero of Serbian nationalism is at last safe back at home — in Monte Carlo. Or was it Marbella? Or Manhattan? Or Miami? These modern nationalists are damned hard for a rootless cosmopolitan to keep up with.

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